America’s Next Big Manufacturing Decisions | Alex Krutz

Is manufacturing really coming back to the U.S. and are tariffs really working? Volkswagen decided to open up a plant here instead of Mexico and Canada. Today we sit down with Alex Krutz, who was part of the federal administration working on some of these trade deals. He will tell us what he's seeing out there in the market now. Audi's never made a car in America before. That's great. It's a great opportunity for Americans to get middle class jobs. I think we're going to see more foreign direct investment from companies, not only automotive, but semiconductor, medtech. I'm Siamak. Welcome to Market Insider. Alex, it's great to have you back on. Welcome back. Siamak, thank you for having me. This is great to be back with you. We want to talk to you about manufacturing. And last time you were here, you told us trillions of dollars are coming into manufacturing and we're going to see the results. What are you seeing out there right now? So it's $20 trillion that came in in 2025 compared to $1 trillion in the four years previous to that. We're seeing a lot of that coming in. Just a big announcement that just came in, a couple billion for Audi that's now going to close their plants in Canada and Mexico and not even go back to Europe, but is creating and establishing a plant in Georgia. So that's just even the most like most recent of investments, right, that are new and that are happening. But we can think about like chips in New York. We can think about other fab facilities. There's other shipbuilding that's going on, other automotive, aerospace growth, lots of supply chain, and not to even mention all the critical mineral deals, milling, mining that are going on right now. And this administration, the strategy is to bring manufacturing back because of national security concerns and or other other factors involved as well. Absolutely. So, I mean, the president administration laid it out for everybody to see in the national security strategy and then the national defense strategy. There's really four main pillars, right? We think about the economic statecraft that the administration is deploying in what we're seeing. Number one is protecting the Western Hemisphere. We're seeing a lot of that with the Panama Canal, Colombia, Venezuela, Cuba, and now even Greenland, right? Lots of energy around Greenland, or I'd say lots of discussion in the last months about Greenland, we could talk about that. But really protecting the Western Hemisphere where the United States is predominant there. Another one is protecting the borders. And we're seeing that with the lockdown borders. Other things are deterring China and then increasing the defense industrial base. Uh, uh... for that reshoring and then ultimately having our allies carry some of the burden and so those are some of the principles that we're seeing in the national security strategy to the national defense strategy that is really working its way into the economic statecraft that we're seeing now. So are we seeing these policies right now happening and can you explain to us what they look like? So the administration's policy is energy dominance. We have to be an energy exporter. That controlling the energy flows of both the Western Hemisphere and into the world is really where we create a competitive advantage with other countries that the United States does. The Western Hemisphere, we're seeing that, you brought up Venezuela, the removal of Maduro. Was not a regime change because you have actually the same regime there, but the the head of that was removed to create a better economic condition and Also, that then pushes China out from their belt and road suspender strategy. And so all of these little actions that have taken place within the Western Hemisphere or Greenland, as an example, controlling the Arctic ways, the mining that's going to start taking place there or into the Panama Canal, where the Chinese are not controlling the Panama Canal now. Now, all these different things are that the protecting of the Western Hemisphere. And creating economic conditions where the United States would be in the driver's seat of that in this hemisphere. How is China benefiting from Venezuela and how does it work now? How would the U.S. benefit from it? So I'm not an expert on it, but all I'll say is that... Probably the oil that's being sold from Venezuela, as an example, is being sold at a deep discount to the Chinese, whether it's on market, off the market. And so those deals was giving China significant energy cost benefits because there would be some type of deals between the CCP and the Maduro regime. But now that Maduro is gone. The Chinese have to buy at market value. And so when we think then about in broader context of manufacturing, the subsidies, the costs, those type of where they can get those lower costs, it creates an unfair advantage across all the different countries that they compete with, including the United States. So now the fact that they have to buy energy at market price is just even one factor that they're having to deal with, which is not. The subsidies and lower costs that they had is this the same situation in Iran because I know that China buys oil from Iran at The significant discount I would think it's the same way because there's a lot of on market But there's off-market Purchasing of you know the shadow fleets that you know We've all heard about and I think that China was a big beneficiary and there's other countries as well. There were beneficiaries of below market pricing. And that would create an unfair advantage. And so now with the blockade that we've seen, there's been a lot of success in stopping that, you know, non-market or under market pricing of that oil and energy that now those countries are having to buy it at market pricing. And that creates a different dynamic. It creates more of the free, fair and balanced trading environment that we need to have. The administration really wants to ensure that if energy is purchased from different markets that they're purchased at market rates, so it keeps a fair dynamic, or to come to the U.S. and we can then become even a larger net exporter of energy. And in terms of trade, you dealt with this. And, and, uh, How are the tariffs done, and how do they work now? The thing that a lot of people don't understand is tariffs have been around for centuries, right? Every economy has always had some type of tariffs, some protectionism, to protect their domestic manufacturing capabilities. Many countries that we've been dealing with for many years have actually had tariffs and even non-tariff barriers, right, where they wouldn't accept U.S. ...product into their marketplace, or they would have high tariffs on products, as an example, 200% on milk into Canada. And so it would make the U.S. milk going into Canada uncompetitive, just as an example. Or 800% of rice into China, or into Japan for U.S. rice. Not saying that we would export rice there, but... So both allies as well as, you know, peer competitors have always had some type of tariffs and non-tariff barriers where they just don't even allow product, some other country product into their marketplace. And so the administration put IEEPA tariffs, they used the tool of IEEPA, the International Emergency Act, for their original tariffs. And we do know that the, since I think the last time we talked, that the... The Supreme Court changed things. The Supreme Court changed and, but what they didn't do, at least in my opinion on this, they didn't say that tariffs were illegal. They just said the tool that was used, the IEEPA, was not the right tool. And so now the administration's gone to 338 and other tariff authorities, including also using the 232 sectoral. Investigations that the Commerce Department does, as well as the 301 investigations that the United States Trade Representative, or USTR does, to then apply tariffs to either different economies or sectors that have unfair trade practices. We have talked to some manufacturers that the tariffs have caused them to come here and come back. And some others have diversified. But others are saying, experts are saying in the field that it's not sometimes very clear if these tariffs will stay. And do you think they will last a long time if the administration changes or if Republicans go, Democrats come, or if there is a new Republican government? So I think that manufacturing is a universal love language, right, between Democrats and Republicans. Every senator, congressman, congresswoman. They all love to have a big, good factory in their backyard. It's great paying jobs, good middle class, creates stability. It's, you know, it creates a good community environment. So if we think of an example from Trump, the first Trump administration, they put in significant tariffs around China. And during the Biden administration, they didn't remove those. And so I think that... Another party inherits tariffs and there's revenue coming in, and it's a policy that encourages domestic manufacturing. I think that's a very hard thing to change that trajectory. So I would see that even if the House, the Senate, or if there was some other change in political leadership, I don't see a lot of change in the motion towards reshoring domestic manufacturing and ensuring our economic and national security. We have countries like China which we compete with and then there is like friendly countries like Canada and European Union. How does the tariffs look like on each party? Is it different for different countries? A lot of countries will subsidize their product lines. They'll have lower cost labor. They'll have manipulation of their currency. There's a lot of different methods In order to create an unfair. And a lot of countries have created that where it's a real difference in cost, but it's not a real difference. So if they actually play by free, fair, and balanced trading environment conditions, the United States would be very competitive against some of those. So I think that the tariffs are to encourage companies. That it's really a premium for them to buy product from another country, and it's really encouraging them to create a domestic source for that. Do you think now we're at a point where we're going to see a lot more manufacturing come back? Do you think we're in the beginning, in the middle, or...? I think we're still in the beginning stages because setting up factories, and I think we talked about this last time, factories could take years to set up. So once you start the planning of it, you then do where the land is, the state, the incentives, then you get the investments, you get the loans necessary for it, you start building out construction, takes a couple years, it creates lots of jobs. And so once you get that underway. Your business plan is set, right? You're not going to just kind of stop factory construction. You're not going to stop the supply chain reorganization back to that factory or to that factory. So once it gets in motion, it will last for a long time. And so I don't see that it changing if projects have gotten underway, which if we look at Um, GDP as an example, right. Being at 3.4% that just came out, which is. You know, above the 3.2, which was projected, I think that there's still opportunity for growth into that into next year, even into four, maybe even 5% if we continue into this trajectory. How much of this growth do you think is coming from manufacturing? So I think that a baseline is right around one and a half to call it 2% of GDP is like normal economy. I think that's neutral. It's not really a lot of growth. It's just kind of going. I think there's probably about a percent of that. And this isn't exact, but I would say probably a percent is the AI and data center boom, which is the construction and all the things that are going into that from a technology investment. And then probably a half a percent of that is that. The manufacturing piece of that really kind of coming back. So maybe that might be, you know, just a little bit different, but that's the way I kind of look at the GDP. What are your thoughts on Canada? Because we're hearing a lot of conflicts between U.S. and Canada now. If we look at the data, the data says that there's a trade imbalance. Canada has had a net surplus in our trade relationship. And we are the much larger economy. We are the customer of the world. We are a much larger trading partner to Canada, and we have a deficit in trade to them. And I think that the administration has looked at that and said, look. We should at least have a neutral trading relationship. We shouldn't be in a deficit position with smaller trading partners. So I think that that's kind of the basis of the discussion. And I think that probably the Canadian leadership is not really respectful of that. And I think that they are looking towards other partners, whether it's China or European Union. To come up with some of their trading dynamics. And I think it's going to be a net negative in the long run. I think we naturally need to have a strong Canadian trading partner. But right now, that condition is not there. And furthermore, it's leading to the degradation of the USMCA, right? Which is a policy that the president put in after NAFTA in his first term to take over after NAFTA. But that is now... And that trading agreement, again, is leading to an annual deficit in our trade relationship with Canada. So something has to change. We should not be in a deficit position. And I think that's what's creating the friction right now. Is Canada going towards China more? I think that they're entertaining those discussions. But if I was to say where they naturally go to more is the European Union. But the European Union can't produce everything it needs for itself. It relies on China. So I think it's going to be challenging for the Canadians to just rely on the European Union. So therefore, as a default, they're going to be working with China, unfortunately, on some trading parameters. And I think that's what the president is trying to help encourage the Canadian government is that that is not a good situation to allow the Chinese into the Canadian market. As an example, we see automotives in Europe. 800,000 EVs were placed into Europe when they should have had two or 300,000 of China EVs. And it's decimating the European automotive market. And that's going to be the same thing that's going to happen in Canada, that the Chinese, once they enter through those partnerships and support, they're going to overtake all the manufacturing, overproduce, dump, and have those unfair trading conditions. And it's going to really... create a negative impact on Canadian manufacturing and also U.S. manufacturing because of that. We have had some negotiations and some conflicts with Europe. Yes. At least, you know, loud discussions in media. But what are your thoughts on that? What is the administration doing with Europe? So I think that the administration told Europe many years ago, don't cut off your energy sources to then rely on Russia. And now they rely on Russia, and that's part of the problem with, you know, conflict between them and the Ukraine, because the Europeans rely on Russia for energy. I think that there's also then the balance of NATO and the equipment that the United States provides and the support the United—it's overwhelmingly shifted towards, you know— So, uh, uh... slanted to the United States so that the United States carries the burden. We're paying most of it. We're paying most of it. And so the president has said to the NATO allies, carrying your fair share up to 5%, of your GDP should be on defense spending because many of the countries would be at 1% to 2.5% of their GDP to military. And then when they say, oh, support the Ukrainian war, support this, or the United States should lead these missions. That puts the burden onto the U.S. I think the administration's done a really good job of encouraging our allies, up until including the NATO Secretary General, has said that the European Union needs to invest more for its own security. So I think that shifting the burden is a good thing, right? And it'll be good for the Europeans to be able to have not only economic but also their own national security interests in mind. Do Europeans still look at us? Because some people say this has created a conflict and they may want to turn towards China as being a partner. Do they look at us as their major ally? I think they still do. I think that they bristled a little bit with some of the policies. I still think that the European Union, the UK, other countries are still strong allies with the U.S. and benefit from that relationship. At the end of the day, we're a very old and strong democracy, and the Chinese are not. It's a communist regime. And so the European Union really should think about what is. important in their trading partner in regards to common principles, you know, shared values. And if they believe that the Chinese have those common principles and shared values, then sure that they're going to drift towards that. But or if they see that the United States generally has more of their shared interests, the protection, economic and national security interests are tied. I think that they'll see in the long term that the United States is still And will be a good partner for them. Is Mexico different than the way Canada, the trade that's going with Canada? I think so. I think that Mexico has a much more favorable condition. I think they recognize the importance of the United States as a trading partner. So I see that generally they are much more receptive. They also provide a different type of labor set. They're a larger population. It's usually more manual labor. So maybe some of the... I'll call it lower-end type of components and things that are a natural fit for Mexico. It's very complementary to the United States, where Canada has a lot of technology, higher-skilled labor, an engineering workforce, which is competitive to the United States. So I think that naturally the dynamics of the manufacturing ecosystems are complementary in Mexico to the United States. We have been told by... other industries, like experts in apparel industry, that the Chinese have really built a lot of textile manufacturing capabilities, capacity, and they are actually the dominant supplier to other countries. Like when something is made in India, it's really not made in India, it's like 60% made in China. Made in Vietnam, made in Mexico, when it's in apparel industry, a lot of times the textile and the starting material, the backbone comes from China. Is that happening? Yeah. So let's take that. Chinese typically go from mill to market. They want to do the whole value stream of products and push out their competitors. One of the things administration has really looked at, to your point, was that There's made in China is going through Vietnam or Mexico. So a lot of the investigations, the sectoral or country investigations at 232s and 301s start to look at what is actually built in that country that we're trading and trading with, or is it coming from China through there just as a pass through? And so one of the ways that the administration was really trying to address it was through the bilateral trade agreements. And that's where those, you can't have A predominant amount of Chinese goods that are made in China and then passed through. So a lot of those criteria and requirements of what's allowed and what's not in the trade are now in those bilateral trade agreements where those weren't existing before in the just free trade environment that we had without the bilateral trade agreements. Do you know if they have to pay tariffs, if they are? Shipping from China. Yes. So once it's found through CBP and the flows of trade, there will be certain tariffs that are applied if it's actually made in China, or it's the Chinese tariffs onto those products. Now, one other question. This is something that people have asked us about the uncertainty of the tariffs changing. Do you think they stabilize from here? This is the number. You've got to deal with it. And that's the number going forward. Or is there going to be a lot of changes? And you've been an insider in this space. What does it look like when you guys are making those decisions? I think stability and tariffs probably don't go together very well, right, in the same sentence. I think that there's more stability now, right, in the tools that they're using, the 232s, the 301s, the 338, and those tariff tools are more steadfast and tried. And I think as the bilateral trade agreements really come into place and get finalized and secured, I think that they will flatten out at some percentage. But I don't, I think, so I think there'll be probably less like ups and downs. There's a lot of... The negotiation that was being done, at least from my perspective, negotiation at very senior levels of governments for those bilateral trade agreements and the tariffs were used as a tool to get, you know, I'll call it free, fair and balanced trading conditions, right? It wasn't used to create leverage or to create an unfair. It's just to create a free, fair and balanced. I think that's a really important concept for us to continue to think about. So I think there will be more stability, but will it totally normalize? I don't think so. There will always be a little bit up and down on it, but maybe not as much as 2025. The European car companies, the 800,000, the Chinese EVs came in. We have a big tariff here on cars, on EVs, Chinese-made cars. Has that helped this market? I'm a big advocate that the U.S. automotive market needs to stay U.S. automotive manufacturing market. If the Chinese were to come and start building EVs here, they would, from China, likely subsidize the companies that are building here. They would probably overproduce, like they're doing in Europe, which would create a cost dynamic, a negative cost dynamic for the GMs, the Fords, other U.S. car manufacturing. And then lastly, there's a technology piece, right, that suppliers would be then supplying, U.S. suppliers supplying their technology into those EV companies that they're building here, and that technology would make its way back to China or to other countries. And so I don't think that that's a net positive position for the U.S. to have with Chinese manufacturing there. Sorry, Chinese manufacturing here in the U.S. So when you heard about the plants opening, Audi plants, so they're shutting down Canada and Mexico to open up in the U.S. What were your thoughts? Did you predict that could happen? Audi's never made a car in America before. That's great. And the Southeast is a wonderful place to do that. The automotive competition down there is very strong. There's a big supply chain. It's a great opportunity for Americans to get middle-class jobs and to really show we can be cost competitive and build great products here. So I think it's just another showcase of what Americans are going to be able to do. So we have to think more geopolitically. What's happening in Europe, Audi's not going to go back there because the Chinese have entered that market and European automotive companies have stated even publicly that if they continue on this trajectory with Chinese autos in their market, they're not going to be the same company in five years and they'll have a negative impact to their business. And so I think that took it off the table. And I think the tariffs and the overall manufacturing incentives with the One Big Beautiful Bill and all these different incentives that are being created by the administration, plus the tariffs on other countries such as Mexico and Canada, it created a natural condition for Audi to look at Georgia for its new automotive facility. So I think that there's several different... pieces that have been put together or, you know, a plan, you know, a roadmap that's kind of led to decisions like that. Do you think there will be a lot more of plants like that that will come back? Yeah, I think that we we're starting to see that with some of the even the U.S. auto companies are expanding current facilities. I think we're going to see more foreign direct investment from From companies, not only automotive, but semiconductor, medtech. You know, it's starting to take place in shipbuilding. You have the Koreans with Hanwha in the Philly shipyard, some other different situations around that. So there are a lot of conditions for foreign direct investment that I think will be a net positive for the U.S. And you served administration for about a year, right? Yes. Just shy of a year, yeah. What was it like for you? It was a great experience. I never would have thought that I would have been asked to serve in the government. It was not something I went to look for or ask for, but it just happened to, you know, the right conditions, I guess, found me. And they asked me to go into that role as the Deputy Assistant Secretary for Manufacturing at the Commerce Department. To help work with industry, engage the industry, and also do analysis for all manufacturing for Secretary Lutnick and his team. And so it was a great honor to do that. And was it challenging? Because these roles are very difficult. You have to work many hours and a lot of times people have to commute or if you're, you have to move to D.C. I, you know, I've been through two army boot camps and started my own business and I've never worked as hard as I did in the U.S. government. It was, it was insanely difficult days. And in my personal case, because I knew that I was going to be able to contribute to this job because of Because of my skill set and knowledge. I knew I was going to do this job and then come back to my life, my family, my business. So I actually traveled back and forth every week to Washington, D.C. from Los Angeles. Every week. Every week, Sunday night, red eyes, Thursday, Fridays, coming back. And it was a great experience. I told my family I would come back and see them every weekend while I did this job. And it was a great experience, and I wouldn't, you know, I'd go back and do it all over again. And if there was one thing you could tell us that you learned from that experience that most people may not know about working in the government. And you did a lot of studies and looking into trade issues. It was great to see how many dedicated Americans work in the government. I know that we see a lot with, you know, Doge and other maybe organizations that don't have a good moral compass and maybe have fraud and these type of things. But generally, there's some really, really great patriotic Americans that work within the government. And I was really surprised at the capabilities that the team that I had and others that I worked with. It was fantastic to see. See, that's just... On the kind of career side, but. Working with other political appointees like myself that were coming in from industry that the administration was able to bring in, the wealth of knowledge and capabilities and skill sets they had was second to none. So it was like a varsity team of just really, really great professionals. And it was just a great experience to learn about industrial policy, how the government works, the amount of executive orders that come out, how they're implemented, and how How regimented the government is and the rules and regulations that are followed. It was a great experience to see how the government works really from the inside. You're passionate about bringing manufacturing back, right? This is something, tell us about that. Where do you get that from? I've been in... Shops and manufacturing environments for over 20 years, and I like to fix things. That's what my consultancy, Patriot Industrial Partners, does is we go and help factories with value creation, performance improvement, industrial strategy, and I like to help companies make them better, and that's what our consultancy does. It's very rewarding to know that when you started a project there was a problem and we help them from an industrial engineering or mechanical engineering or quality engineering type of or operations. We help them make their business better and those are the rewarding things that I like to do. When it comes to manufacturing, I think that it's a great job. It's a great job for many people in this country have and in the 60s, 70s and 80s, we had lots of manufacturing here. And we had a middle class developed around that. And I think that we've lost a bit of that capability. And I think that younger generations will benefit from all the opportunities that will come back with these manufacturing roles, you know, whether it's electricians or construction or manufacturing technicians or machinists, all these type of roles that are very hands Very technical, will be good for... Our society to bring back in terms of what you saw in now. There's the second Trump administration You were not involved in the first one. That's right is there a big difference between the Trump one and Trump two in terms of manufacturing and economic policies So I think that economic statecraft has become much more of an anchor and underpinning to this administration. The president understands and the administration understands that when you, when The United States can help countries become economically viable, they can provide for their people, provide services, provide goods, and have good trading agreements with the United States that can uplift everybody. And that then should lead to less wars, less conflict, more peace, right, where there's prosperity for everybody. And I think that the president's done a really good job of trying to spread that. To all different places, we look at the different peace agreements that have been reached with that, because economics, economic prosperity, is a really, really important thing for countries and their leaders to have for their people. So I think that having that much more of an underpinning of this administration maybe versus the last one, I think it's much more concrete now as a theme. And what they're pushing towards. So the ideology is more America first, but in these deals, we are looking at other countries' interests as well. Yeah, I think that we've had for many, many decades what's called a free trading environment. And free trade is good when both parties operate off of basic trading principles. But that hasn't been happening, especially since the early 2000s, when China entered the WTO, the trading environment has become unfair. And so... The administration now really looks at it, not just a free trade, but what's fair and balanced. And that's when you get the tariffs, the bilateral trade agreements, the policy tools that are being implemented. And yes, it's called the America First trade policy, which is what I helped go implement at the Commerce Department for Secretary Lutnick and the president. But when you say America First, it's really about how do we put the interests of Americans first While creating a good deal for everybody around. So it doesn't mean America first and everybody else is last. It just means that we shouldn't have trade deficits. It means that we shouldn't lose our manufacturing to unfair... Fair, uh, uh, uh, uh. You know, countries, you know, conducting unfair trade practices. So we need to have free, fair and balanced. And yes, that means that America first should be the trade policy, but it doesn't have to mean that others are last or that they lose. Everybody should be able to win, but we shouldn't do, others shouldn't win at the behest or detriment from Americans. In terms of the infrastructure, you know, bringing manufacturing back, there's a lot There's a lot of... parts involved in the supply chain and building this infrastructure. How long do you think it will take and do you think all of it will come back or does some of it have to go to other countries around us? I think that putting tariffs on everything is not a good idea because there's some things that we don't make here. As an example, rubber for tires, right? That's made in Brazil and parts of South America that have weather conditions that are suitable for growing rubber. And so it wouldn't make a lot of sense to put tariffs on that because that rubber manufacturing, as an example, can't come back to the United States. So that's where we have to think of economies and countries that have those capabilities and where we create the right trade agreements and trade environment with them so we can benefit from, they can sell into the US as the largest customer of the world, but yet we can get a favorable trading environment with them. So I don't think everything comes back. I think that over the next year or two, there will still be some rationalization as to what will come back now. Are we going to make all the textiles shoes and shirts and And toys, you know, probably not. And is that OK that some of that is with our trading partners like the European Union or Mexico or in South America? I think so. But should we reshore critical technologies and capabilities, shipbuilding, more aerospace, all of our defense, automotive, biotech, medtech? Chips, semiconductors, printed circuit boards, and PCBs, these are all things that are critical to infrastructure, and I think that we should continue on reshoring those capabilities. Alex Krutz, it was great to have you back on. Thank you so much for being here. Come back and update us in the near future. See you, Mac. Thank you very much. I appreciate you having me on. Tell us your thoughts about this conversation with Alex. Do you want to see more manufacturing here? Or it doesn't matter to you where the products are made? Make sure to tell us in the comments. I'm Siamak, this is Market Insider. We'll see you next time.